November 12, 1963 FOMC Minutes

FOMC minutes

The Chairman then proposed that the Committee vote on a policy directive identical to the one issued at the previous meeting except for deletion of the reference to Treasury financing. Thereupon, on motion duly made and seconded, the Federal Reserve Bank of New York was authorized and directed, until otherwise directed by the Committee, to execute transactions in the System Account in accordance with the following current economic policy directive: It is the Federal Open Market Committee's current policy to accommodate moderate growth in bank credit, while maintaining conditions in the money market that would contribute to continued improvement in the capital account of the U. S. balance of payments. This policy takes into consideration the fact that domestic economic activity is expanding further, although with a margin of underutilized resources; and the fact that the balance of payments position is still adverse despite a tendency to reduced deficit. It also recognizes the increases in bank credit, money supply, and the reserve base of recent months. To implement this policy, System open market operations shall be conducted with a view to maintaining the degree of firmness in the money market that has prevailed in recent weeks, while accommodating moderate expansion in aggregate bank reserves. Votes for this action, Messrs. Martin, Hayes, Balderston, Bopp, Clay, Irons, Mitchell, Robertson, Scanlon, and Shepardson. Vote against this action: Mr. Mills. commented that his vote in favor of this action Mr. Hayes inconsistent with the views he had expressed earlier. might appear modified his position, he said, because he had been impressed He had by the arguments at the meeting in favor of adopting a wait-and-see

attitude. He agreed with Mr. Scanlon that after another three weeks the Committee might find it necessary to change its policy. He also felt there was some misapprehension at the meeting on the position of European governments with respect to their use of monetary policy. He thought the Europeans would be influenced principally by their own situations, and not so much by what this country did. Moreover, he thought it incorrect to say that there was a complete parallelism of interest between the Europeans and this country with respect to upward movements of interest rates, since our balance of payments with Europe was still sharply adverse. Mr. Robertson said he had voted in favor of the directive adopted because he thought the language was adequate to encompass his views. He e.pressed some doubt, however, that the directive would be construed consistently with his thinking. Chairman Martin asked whether there was any objection to the earlier suggestion by Mr. Stone for revising the continuing authority directive to direct the New York Bank not to exceed $1 billion in the change in the aggregate amount of U. S. Government securities held in the System Open Market Account during any period between meetings of the Committee, and no objection was expressed. Thereupon, upon motion duly made and seconded, and by unanimous vote, section 1(a) of the continuing authority directive to the Federal Reserve Bank of New York was amended to read as follows:

To buy or sell United States Government securities in the open market, from or to Government securities dealers and foreign and international accounts maintained at the Federal Reserve Bank of New York, on a cash, regular, or deferred delivery basis, for the System Open Market Account at market prices and, for such Account, to exchange maturing United States Government securities with the Treasury or allow them to mature without replacement; provided that the aggregate amount of such securities held in such Account (including forward commitments, but no including such special short-term certificates of indebtedness as may be purchased from the Treasury under paragraph 2 hereof) shall not be increased or decreased by more than $1 billion during any period between meetings of the Committee. Chairman Martin suggested that the item on the agenda pertaining to the question of making available minutes of the Federal Open Market Committee for some past period for use of scholars and others once again be held over until the next meeting, and there was no objection. Chairman Martin then referred to the tentative schedule of meetings of the Federal Open Market Committee for the remainder of 1963 and for 1964 that had been distributed at the previous meeting, and asked for comments. Mr. Hayes observed that from time to time he had expressed doubts about the need for the Committee to meet as often as every three weeks on a regular basis. The Chairman replied that the frequency of meetings could, of course, be raised at question of the thought it useful for the members to have some idea any time, but he of the schedule of meetings to expect during the coming year. No raised to the schedule that had been distributed. A objections were copy of this schedule has been placed in the files of the Committee.

It was agreed that the next meeting of the Federal Open Market Committee would be held on December 3, 1963. Mr. Hayes then summarized for the Committee the status of a Treasury Department program intended to revise and improve statistical reporting on foreign loans by major U. S. tanks. Thereupon the meeting adjourned. Secretary